The World Bank approved a $42 million grant to assist the Palestinian Authority (PA) meet its immediate financing needs in the wake of a severe fiscal crisis to avoid suspension of vital basic services to the Palestinian population.

The grant will be made through a multi-donor trust fund—the Public Financial Management Reform Trust Fund - launched in 2004, with support from international donors, to channel budgetary aid to the PA against progress in financial reforms. The EC, France, the Netherlands, New Zealand, Spain and the UK contributed to the current grant.

“The Reform Fund was designed to help the PA deliver essential public services under fiscal duress, while it continues to stabilize its public finances and advance fiscal reforms,” says David Craig, World Bank Country Director for the West Bank and Gaza.

“The release of this tranche will allow the PA to maintain economic and social stability in the short term by covering urgent recurrent expenditures such as salaries of civil servants. But it remains a critical priority for the PA to undertake comprehensive reforms to bring down the deficit to sustainable levels,” Craig adds.

The West Bank and Gaza continue to suffer from a debilitating economic recession brought on by restriction on movement of goods and people since the September 2000 intifada. Today, more than 40 percent of the Palestinian population lives below the poverty line of $2 a day, while one out of four Palestinians are unemployed.

Since the outbreak of the intifada, the World Bank has focused on responding to short-term emergency needs as well as providing medium-term development assistance. In addition to administering the Reform Fund, the World Bank is currently financing 12 projects totaling $154 million in the West Bank and Gaza, aimed at delivering a range of services such as health, education, and basic municipal services as well as creating jobs for the Palestinian people.